CARGOCONNECT-OCTOBER2024 - Flipbook - Page 13
2025–26 and create over 10 lakh
jobs. Achieving this target will
require innovative strategies
and adaptation. On the macro
level, India’s global engagements, including recent bilateral
agreements on critical minerals,
component procurement, and
technology transfers, reflect a
strategic approach to enhancing
its electronics sector.
However, high logistics costs
remain a signi昀椀cant challenge.
Transportation expenses for a
premium smartphone made
in China are around US$0.80
per unit, while in India, these
costs can rise to US$8, depending on location and proximity
to ports or airports.
This disparity impacts
India’s competitiveness as
a manufacturing hub, as
logistics costs are critical to
component supply chains.
Additionally, the shift
of component manufacturing to India faces challenges
such as underdeveloped
supporting industries and
a limited skilled workforce.
Training programmes for
specialised skills, such as
SMT line operations, are still
evolving. Initiatives like the
Pradhan Mantri Kaushal Vikas
Yojana (PMKVY) and Deen Dayal
Upadhyaya Grameen Kaushalya
Yojana (DDU-GKY) are essential
for skill development.
To address these challenges,
India must enhance regional and
national connectivity, foster local
support industries, and build a
skilled talent pool. Successful
regions have become models for
e昀昀ective component manufacturing, demonstrating the importance of electronic components
for supply chain resilience.
For India to be recognised
as a reliable global electronics
supplier, it must focus on localising both component production
and 昀椀nal device manufacturing.
The reliance on foreign units,
which bring technology and
practices from abroad, is driven
by competitive production costs
and favourable import conditions facilitated by free trade
agreements (FTAs). However,
supply chain disruptions—such
as challenges in maritime
navigation, tari昀昀 policy changes,
and unforeseen events like the
COVID-19 pandemic—pose risks.
Enhancing localisation
e昀昀orts is essential for building
supply chain resilience. This
requires overcoming complexities in integrating global value
chains (GVCs) and fostering
regional expertise. Collaboration with international partners
controlling critical technology
and raw materials is crucial.
Strategic policy and government
interventions are needed, including cautious collaboration with
partner countries and align-
ing investments with sectoral
needs. Regional policies should
be tailored and replicated based
on state-speci昀椀c capacities, promoting cooperative federalism.
Expanding the range of critical
minerals traded on Indian commodity exchanges and improving
price settlement mechanisms can
address supply-demand imbalances, attract investment, and
strengthen domestic mining
infrastructure.
India’s recent entry into the
Minerals Security Partnership
(MSP), a coalition of 13 countries
and the EU aimed at fostering
responsible global supply chains
for critical minerals, represents a
strategic move. This partnership
aims to stimulate investments in
the processing and re昀椀nement of
minerals, is essential. A balanced
approach that includes ‘aid for
trade’ and development 昀椀nance
will foster mutually bene昀椀cial
trade relationships.
Upgrading existing FTAs,
such as those with ASEAN and
MERCOSUR, could enhance
mutual bene昀椀ts and strengthen
ties in strategic sectors like
ESDM. This will support India’s
goals in digital economy development and green transitions.
On the intellectual property
(IP) front, establishing stable IP
partnerships is critical. Rather
than reinventing technologies,
India should foster collaborations between IP owners and
local manufacturers to access
e昀케cient extraction and processing technologies and strengthen
Regional efforts align with the Indian
Government’s ambitious goal to increase
the electronics manufacturing capacity
to `24 lakh crore by 2025–26 and create
over 10 lakh jobs. Achieving this target
will require innovative strategies and
adaptation.
critical minerals into high-value
components. However, India
should explore partnerships with
African nations, which remain
underutilised, and draw lessons
from China and European countries on securing supply chains
through strategic investments
in foreign mines. Technology
transfers could enhance India’s
R&D, innovation, and human
capital development.
India also faces challenges
due to complex tari昀昀 structures
and high tari昀昀s on sub-assemblies
and components. Since 2016,
India has increased tari昀昀s, while
countries like China and Vietnam
have reduced theirs, resulting in
a Bill of Materials (BoM) cost that
is approximately 8–10% higher
in India. Rationalising tari昀昀s is
crucial for making manufacturing
cost-e昀昀ective and attractive for
GVCs. Establishing clear foreign policy and international
trade approaches, especially
with countries rich in critical
the local component ecosystem.
Infrastructure gaps also pose
challenges. India has made progress through initiatives like the
National Industrial Policy (NIP),
aimed at reducing freight costs and
clearance times. Continued focus
on developing competitive land,
clean power, water, renewable
energy, and gas infrastructure will
support the logistics sector and
overall manufacturing environment. While reducing dependency
on major international suppliers
remains a long-term goal, a China
+1 strategy could o昀昀er short-term
solutions. Importing from Chinese
manufacturers while sourcing
components from alternative
partners can mitigate risks and
reduce dependence over time.
Creating domestic champions in
partnership with leading 昀椀rms is
key, as these 昀椀rms will need local
partners to supply intermediate
goods, some of which may require
further development to meet
global supply chain demands.
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